Tuesday, April 15, 2008

Does anyone else think that the economic stimulus plan is a bad idea?

The economic stimulus checks are coming to you and to me. In fact to everyone that filed a tax return. This is not a tax break. You get it even if you didn't actually pay any taxes. In fact I get more because I have three kids. Now more money is hard to say no to and I don't plan on sending it back.

But, how is this supposed to stimulate the economy? The economic woes we have are because we spend more money than we have. That is the core of the problem, not that we are short a thousand bucks. It is too easy to get credit. I get credit card applications that are preapproved every day and when we bought our house they told us that we could get a loan for over 200,000 with only pennies on the dollar down.

If I ran my personal finances this way it would be equivalent to taking out extra credit cards every time that my car broke down. I guess under a consumption economic model it is best if we all drive new cars, buy new houses, eat off of paper plates, drink bottled water, soda, and eat out every meal. Gee fun, but really expensive.

I think that the answer to our economic troubles is to change the consumer economy to a sustainable economy where consumption is balanced by production. I think we should be discussing how to get America out of debt and how to get consumers saving money not spending it. I think that increased federal debt is a bad idea by the same logic. Tax cuts during a time of war seemed just as bad of an idea. We need to live more frugally, spend less, use less, and produce more.

We are so rich, yet we don't ever have enough. We are consumption addicts and we need to stop. There is enough and to spare, but only if we are not resource gluttons.

Well, From what I understood the purpose of the payout was to increase consumer spending, my portion was spent before we received it. But by living in the red on student loans is not all my money spent before I get it?

Totally agree. It's hard to see this as anything but an election-year sop, and one in which the democrats are as complicit as the republicans. It is, as you rightly note, of a piece with concerning trends. George Will wrote today that "the middle-class debt-to-income ratio is now 141 percent, double that of 1983." According to Wikipedia, the debt-to-income ratio is "the percentage of a consumer's monthly gross income that goes toward paying debts." In Britain, the current debt-to-income ratio is even higher--162%. (The British example is especially revealing--British healthcare and education costs are heavily subsidized, so these debts appear to have been accrued almost exclusively through debt financing of consumer goods.) The same trends can be seen in national fiscal policy. For almost sixteen years, democratic and republican governments have failed to make any progress toward reforming the social security system, an act of negligence that will jeopardize pensioners for at least the next fifty years. The Bush Administration has never included the Iraq war in its annual budget, but has relied on a process of supplementary funding that conceals true costs by setting them apart from other federal expenditures. All of our presidential candidates propose either major new entitlement programs or major new tax cuts--all of which will be paid for, evidently, with magic. The current national debt is $9.4 trillion. Last year's federal deficit was $413 billion--the largest in U.S. history. This year's so-called 'economic stimulus' rebate--which will cost an additional $168 billion--will be paid for with borrowed money. Maybe if they send the rebate checks directly from Chinese banks, we'll start to get the message. There is absolutely no sense of collective responsibility or shared management of resources. Totally unsustainable. In an article called "The Moral Economy," Victor Davis Hanson noted in January that "we must view our present economic challenges in a larger philosophical and ethical framework - and redefine success as being able to pay off what we owe, and spend only what we earn." As the British example shows, increased government involvement in economic matters does not lead to increased responsibility. Clearly, some sort of vast, cultural shift is required. I have no idea how to make it happen.

I don't think the stimulus will help our economy either, but I'll take the money if they're giving it. We will use it to get our emergency supplies, 72 hour kits, and food supplies updated and stocked. I'm really happy to have the money to get prepared. It's something we haven't had the means to do right and now we will get it done.

I agree with you Brian that to really solve the economic problem we have to spend less, and produce more. I have heard some figures (from NPR) that the current savings rate in the USA is -2%! If we are spending more than we make every year, eventually we will have to go through an adjustment (maybe even a small RECESSION) to get back to 0%. Funny how Japan which is as advanced a country as we are has a savings rate of about 18%.